Impact of Brexit on Indian Economy

  • An introduction to BREXIT

BREXIT refers to the withdrawal of the United Kingdom from the European Union. The European Union is an economic and political union of 28 European countries. It was established in January 1958 and at that time it was known as the European Economic Community. It was started with only 6 countries and the UK became its member in 1973 along with Denmark and Ireland. A majority of 67.2% of the British citizens had voted in favour of joining the EEC when the UK held its first referendum in 1975. In 1986, UK assumed the presidency of the EEC. In 1992, the EEC was renamed as the European Union. In 1999, 19 out of the 28 countries decided to use a common currency, the Euro. The UK was among the remaining 9 countries which stayed with its own currency, the Sterling Pound.  EU represented around 24% of the global nominal GDP ($16.220 trillion) for the year 2015. Among other benefits which a country gets by becoming a member of the EU, free movement of capital, goods, services, and labour between the member nations in the Eurozone is the most prominent one.

In 2013, while many other countries were vying to join the EU, the UK citizens were protesting to get out of the EU. Honouring his election promise, PM David Cameron issued a referendum to decide whether it wants to continue membership under EU or not. The results of the referendum came out on 23rd June 2016and surprised everyone in which 52% people voted for BREXIT whereas 48% voted for remaining within the EU. Although the result of the referendum was not binding on Britain’s parliament, the government decided that it will honour the will of the people. Britain is scheduled to formally leave the EU in March 2019.

Among other political and economic implications, the Brexit event set an example of participatory democracy where citizens took a decision which was impacting them despite the presence of politicians. Any major event in history has had both positives and negatives. Brexit is surely one of them.

  • Pre Brexit-Relations with the UK

The UK is the largest G20 investor and employer in India and has played a substantial role in the growth and development of India. British companies in India have generated around 790,000 jobs and around 32% of the 1.96 million jobs created by FDI are in the services sector – the UK’s strong point (since services make up around 80% of the British economy). The UK services sector would be the main beneficiary of a future free trade agreement (FTA) with India.

British successes like HSBC, Standard Chartered and G4S have played a significant part in driving business growth in India. British Banking and Financial services firm, HSBC, was one of the first firms to bring electronic banking and financial technology to India. It is one of the leaders in the financial services sector of India and employs more than 32,000 people. Similarly, the leading security solutions group in India, G4S, a British firm, has more than 160 branches in India and employs more than 1,30,000 employees throughout India.

There are collaborations between the two countries such as the Joint Economic and Trade Committee, the Joint Trade Review, the UK India Education and Research Initiative, the Newton Bhabha fund, the UK-India Tech Partnership etc. The 2 countries also entered into an agreement in 2017 to set a corpus of 240 million pounds, both contributing 120 million, to fund clean energy projects in India.

In 2017, India sent more immigrants to the UK for work, than the rest of the world put together. In 2017, out of the total work visas issued by the UK, India received 58% of the total. Number of Indians going to the UK for study also grown by 27% in 2017.

Figure 1: Influx % of immigrants to Britain from India and from Rest of the world

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